(1) Is Taxation Theft?

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I agree with Ha-Joon Chang that our personal wealth depends in large measure on publicly provided goods and services, which is not to detract from the enormous economic achievements of individuals fending for themselves.

My disagreement concerns the claim that government needs to tax us to be able to spend. It does not. It can always create the money that it needs to accomplish its plans. And if it creates inflation in that way, this still does not refute my contention that government does not require taxes to spend.

It is in a different sense that government must impose taxes on us to be able to fulfil its public purposes. If all the money circulating in the economy remained with the non-government sector, there would not be enough stuff available for government to buy and use to carry out its duties/mandate.

This is where taxes come in: government takes away purchasing power from the non-government sector by imposing taxes on it. In this manner it ensures that the non-government sector does no longer have the purchasing power to acquire all the resources, goods and services on offer in the economy, or secure to itself too large a piece of the total pie of output.

Not funding is the function of taxes but the rationing of the non-government sector's purchasing power.

So, is taxation theft?

In this sense it is certainly not theft: government does not have to take money from you and me to be able to fund its spending.

In another sense it may be considered theft: by rationing purchasing power and thereby coercively transferring command over some of the resources of the economy to itself, government may be accused of theft — an unlawful or illegitimate appropriation/expropriation of wealth.

(a) If any such appropriation is considered theft, as libertarians do, then taxation is theft.

(b) If (some) uses made of retained purchasing power are classified as unlawful or illegitimate, again one may speak of theft.

But then, (a) is unconvincing, since we do need collective forms of finance, and (b) once we admit the need of collective forms of finance, there will be a wide scope of uses of appropriated funds that is subject to fierce political disagreement. For some, some of government spending will appear legitimate, for others it will not. If everyone accepts the political framework within which government is allowed to impose taxes on them, and government acts within this authorised scope, then taxes are not theft.

One would hope that thieving taxation will remain a minor or at least an efficiently minimised part of the empowering effect that taxation has on government.

I shall post a sequel, as this note turns out to sharpen my thinking on the matter yielding a slightly shifted perspective here in (2) Is Taxation Theft?